Connecting new communities is costly. Who pays what?
For the moment, forget about the cost of everything that’s actually inside a new community. Look outside the community gates. When we talk about infrastructure, it’s all about what it takes to connect a new neighbourhood to the rest of us.
New developments have to be connected to existing infrastructure by roadways, utility systems and transit lines. And they need services like fire, waste management and police. These are known as “off-site” costs. Getting all of that started is expensive, and it all needs to be maintained.
So who pays off-site costs, and when?
Taxes and levies are set by The City of Calgary, and are paid by developers to offset a significant portion of the connection costs. Current levies work out to an up-front investment of roughly $17,000 “per door”.
It’s all based on the Acreage Assessments, which are laid out in the Standard Development Agreement (SDA) between The City and developers. Negotiated annually, the SDA mandates an average levy (Acreage Assessment) of $310,000 per hectare. The average unit density in a new community is set out by the Municipal Development Plan (MDP), but currently averages 18 units per hectare.
So, what’s the math? Well, $310,000 ÷ 18 units = $17,222. That means developers are responsible for paying The City (in round numbers) approximately $17,000 per door in a new community.
The funds, paid many years in advance by developers, are controlled by the City and allocated to infrastructure priorities as Council sees fit.
Developers are legislatively required to remit 10% of their developable land to the City for things like parks and schools, and to designate approximately 30% of land for utilities and roads. The roads and utilities number can vary quite drastically depending on the type of development and the planned road system.
Eventually, when homes are purchased, new homebuyers compensate developers for up-front costs. Then, like the rest of us, new residents add to the property tax pool, contributing to surrounding infrastructure capital and maintenance costs.
There are multiple viewpoints on the cost of infrastructure, and we’ll be hearing more as the new SDA is negotiated. Some would argue homebuyers in new communities actually contribute to infrastructure for established communities. Others believe developers and new homebuyers should pay more for infrastructure.
It’s up to all of us to learn what both sides are saying, think it through and make our views known to our Councillors.
What other information do you need to know to understand the cost of infrastructure? Let us know, and we’ll be glad to dig it up for you.